Someone said that there’s no cure for high prices like high prices; one of our former Secretaries of Agriculture noted that if egg prices get high enough even the roosters start laying them. We’re about to find this out once again regarding milk prices. Not to mix a metaphor, dairy farmers have been living in hog heaven of late what with plummeting grain prices and soaring milk prices. The combination of $25 milk, $10 soybeans and $4.00 corn—sweet! For a while at least. The U.S. All-Milk price will drop below $20 in the next month or two and it might be quite a while before we see $20+ prices again, most likely not for at least a year. Grain prices should stay low for awhile so it’s not anything like the horrible condition not many years ago when the price of farm milk was about half what it’s been in recent months and grain prices higher than they currently are. The VIX Index is a Wall Street term that measures the expected volatility of any of several U.S. stock exchanges. A high VIX is generally considered worrisome since stock market investors–a notably worrisome lot during the best of times–absolutely hate uncertainty. If there were a VIX for milk prices the warning bells would be ringing!
There’s nothing the individual dairy farmer can do about price volatility, but plenty that can be done to limit its impact on his/her farm. For the past year or so I’ve been encouraging farmers to take advantage of the good times (and if $25 milk doesn’t qualify as that, what does?) to make the type of capital investments–equipment and/or land improvement–that will continue to be profitable when prices undergo the slump we all new was going to occur. The best managers will continue to make a profit, even with milk at $18.00, but they won’t make nearly as much. As for those who have been barely keep their financial heads above water, I’m afraid there will be some very tough months ahead.